ECONOMIC DEVELOPMENT: 101
Iowa’s Municipal Professionals Institute 2015
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CAVEAT
This presentation is intended for general
informational purposes only. Answers to legal
questions about Iowa urban renewal law can
vary greatly depending upon the specific facts in
a given situation. Please consult an attorney.
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Five Things to Learn Today
• Urban Renewal Area (URA) vs. Tax Increment
Financing Area (TIF Area)
• Types of Urban Renewal Areas
• TIF Computations and Considerations
• Process for Adopting UR Plans/TIF Ordinances
• Basics about other Economic Development
Tools
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Urban Renewal Area vs. TIF
• Urban Renewal Area
– Where you can conduct UR Projects such as:
• Infrastructure
• Development Agreements
• Blight Remediation
– Area is created by an UR Plan
• UR Project must be identified in UR Plan or Amendment
– Plan/Amendment adopted by Resolution
– UR Projects can be financed a number of ways
• G.O. Bonds
• General Fund
• TIF
– TIF just one funding mechanism
– Bulk of Iowa Code Chapter 403 dedicated to Urban Renewal
powers/procedures
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Urban Renewal Area vs. TIF
• Tax Increment Financing (TIF)
– A funding mechanism for UR Projects
• Concept is to capture the incremental (increased) taxes generated
from the construction of buildings/expansions
– Frozen base (everyone continues to receive all taxes from the
frozen base value)
– Tax Increments generated (new value less the frozen base value)
– Everyone benefits – eventually
– TIF Area Must be within UR Area but need not cover
entire UR Area
– TIF Area created by Ordinance
– Primarily discussed in 403.19 (one section of Chapter
403)
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Urban Renewal Area vs. TIF –
How they Work Together
– TIF can be used for UR Projects that are authorized
within the UR Area that has been designated by the
UR Plan/Amendment within the time allowed under
law.
– Questions
• Is the Project within an Urban Renewal Area (exception: LMI
Match Urban Renewal Project)?
• Does the Project qualify under Iowa Law? Iowa Code 403.6;
Iowa Code 403.12
• Is the Project adequately described in the Urban Renewal
Plan/Amendment?
• Will the Project achieve approved goals?
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A TYPICAL TIF AREA
(CO-EXTENSIVE WITH AN URBAN RENEWAL
AREA)
TIF AREA
This is a specific geographic area, usually
described by its boundaries. The
Incremental Taxes paid in this area can be
captured by the city or county who formed
the area as TIF Reimbursement for Urban
Renewal Projects.
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A TIF AREA FOR PART OF
AN URBAN RENEWAL AREA
TIF AREA
This is a specific geographic area, usually
described by its boundaries. The Incremental
Taxes paid in this area can be captured by the
city or county who formed the area as TIF
Reimbursement for Urban Renewal Projects.
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Types of Urban Renewal Areas
• 6 types or designations are available for UR
Areas
– The UR Plan must designate the type of Area as:
•
•
•
•
•
•
Slum;
Blight;
Economic Development(Commercial & Industrial);
Economic Development (LMI housing);
Economic Development (non-LMI housing); and
Mixed.
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Types of Urban Renewal Areas
• Why does it matter?
– How long you can collect Tax Increment to
advance an UR Project in the UR Area depends on
the designation or type of area
– Referred to as a SUNSET
– Sunset also depends on:
• When the property that the project is located on was
put in the Plan; and
• What the Plan says
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Types of Urban Renewal Areas –
STATUTORY SUNSETS
• Slum and Blight —no statutory sunset
• Econ. Dev. (Comm./Ind) (post-1/1/95 plans) (and no part is slum/blight) 20
years from calendar year after 1st certification of debt
• Mixed Econ. Dev. and Blight--no statutory sunset
• Econ. Dev. (LMI housing) 20 years from calendar year after 1st certification of
debt
• Econ. Dev. (NON-LMI housing) 10 fiscal years starting with 2d fiscal year after
1st certification of debt, (can extend to 15 years with consent of other taxing
entities if city is under 15,000 population)
• CAUTION: Beware of voluntary sunsets (common in the 80’s and 90’s)
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Types of Urban Renewal Areas - SLUM
• This is an area where Slum conditions exist and the city or county wants to
eliminate those conditions (…an area in which a predominance of
buildings or improvements, whether residential or nonresidential, which:
by reason of dilapidation, deterioration, age or obsolescence; by reason of
inadequate provision for ventilation, light, air, sanitation, or open spaces;
by reason of high density of population and overcrowding; by reason of
the existence of conditions which endanger life or property by fire and
other causes, is conducive to ill health, transmission of disease, infant
mortality, juvenile delinquency, or crime…)
• CAUTION: Slum does not include real property assessed as agricultural
property.
• No statutory required sunset (watch for voluntary sunset)
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Types of Urban Renewal Areas - BLIGHT
• This is an area where Blight conditions exist, and the city or county wishes
to eliminate these conditions (…deteriorated or deteriorating structures;
defective or inadequate street layout; faulty lot layout in relation to size or
adequacy; unsanitary or unsafe conditions; deterioration of site or other
improvements; diversity of ownership; tax or special assessment
delinquency exceeding the fair value of land; defective or unusual
condition of title; conditions that endanger life or property by fire or other
causes; menace to public health safety or welfare.)
• CAUTION: Blight does not include real property assessed as agricultural
property.
• No statutory required sunset (watch for voluntary sunset)
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Types of Urban Renewal AreasECONOMIC DEVELOPMENT Commercial and Industrial
• This is an area where a city or county wants to create or retain jobs and
income and strengthen the economy by promoting the development of
new business and industry or by retaining existing business and industry.
• CAUTION: Economic Development – Commercial and Industrial areas
cannot include ag land or century farm land unless the owner consents.
• If plan adopted after 1/1/95 and no part of the area contains slum or
blight and if no voluntary sunset has been adopted, then it has a 20 year
sunset
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Types of Urban Renewal Areas –
TWO KINDS OF HOUSING AREAS
• ECONOMIC DEVELOPMENT – LMI HOUSING
• ECONOMIC DEVELOPMENT – INFRASTRUCTURE FOR NON-LMI HOUSING
• What is LMI?
– LMI stands for Low and Moderate Income and is defined in Iowa Code Section
403.17(14) as “…those families, including single person households, earning no more
than eighty percent of the higher of the median family income of the county or the
statewide nonmetropolitan area as determined by the latest United States department
of housing and urban development, section 8 income guidelines.”
– Where to find County specific information about LMI?
• The 80% county income figures can be found on the IEDA website under
Community Development/CDBG/2014 CDBG Median Income levels.
• The percentage of residents at (80%) income by county is reached by a link from
the IEDA website to the HUD website. https://www.onecpd.info/manage-aprogram/acs-low-mod-summary-data-local-government/ (click on Iowa).
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Types of Urban Renewal Areas –
ECONOMIC DEVELOPMENT – LMI HOUSING ONLY
• This is an area where the city or county wants to promote development or
construct improvements to promote housing opportunities for ONLY LMI
persons.
• Still get a 20 year sunset
• Housing for LMI
– Documentation that income of residents does not exceed LMI
maximum
– Documentation that the housing is affordable to LMI residents
• Can use Tax Increment for a variety of purposes (land purchase, rebates of
increment, loans, grants, etc.)
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Types of Urban Renewal Areas –
ECONOMIC DEVELOPMENT –
INFRASTRUCTURE FOR NON-LMI HOUSING
• This is an area where a city or county wants to help fund the cost of Public
Improvements to serve housing that is too expensive for LMI persons.
This type of area should be mixed with any of the other types only when
the effect that it might have is fully understood and accepted.
• 3 things to remember:
– Public Improvements. Can only use TIF to reimburse Public
Improvements (e.g., streets, sidewalk, water lines, sanitary sewer,
storm sewer, etc.)
– Shortened Sunset. 10 fiscal-year sunset. If the municipality has a
population under 15,000, the 10 fiscal-year sunset can be extended by
an additional 5 years with the written permission of the other affected
taxing entities (e.g., school(s) & county).
– LMI set-aside.
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Types of Urban Renewal Areas –
ECONOMIC DEVELOPMENT –
INFRASTRUCTURE FOR NON-LMI HOUSING
• LMI set-aside. The amount of money you must spend on housing
assistance for LMI persons when you undertake a non-LMI housing
project. Either set aside cash or satisfy LMI obligation, in whole or in part,
by proving the houses are occupied by LMI families or are affordable to
LMI families
– Calculation:
• Percentage of LMI persons in your county x TIF Reimbursement
– Examples on how to spend LMI set-aside:
• Lots for LMI housing within or outside the urban renewal area
• Construction of LMI housing within or outside the urban renewal
area
• Grants, credits, or other direct assistance for housing to LMI
families within or outside the urban renewal area, but within the
municipality
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Types of Urban Renewal Areas –
AG LAND RESTRICTIONS
• Ag land cannot be Slum or Blighted areas
• Economic Development – Commercial and Industrial areas cannot
include ag land or century farm land unless the owner agrees
(written consent)
• Ag Land is defined as:
– 10 acres or more and not divided into lots of less than 10 acres
– Used for the production of ag commodities during 3 out of past
5 years
– Includes land on which is located farm residences or
outbuildings used for ag purposes
– Includes land set aside for environmental protection or
preservation
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TIF Computations and Considerations–
Certifying Debt
• Certify debt to County Auditor by Dec. 1
– Debt = Loans, advances, indebtedness, or bonds,
including interest thereon
– This is amount of reimbursement you are seeking for
qualifying UR Projects from available Tax Increment.
• Certification creates a duty of the auditor to
provide for division of taxes in each subsequent
year without further certification until debt
reimbursed (or TIF sunsets)
• Auditor pays Tax Increment into Special Fund
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TIF Computations and Considerations- Impact of
Certifying Debt on Base/Sunset
• Carefully consider when to certify debt because first
certification of debt in UR Area:
– Sets Base Value for taxable property in the TIF Area (which
is in the UR Area) using the assessed value of the property
as of January 1 of the calendar year preceding the calendar
year in which certification was filed.
• Amendments have different rule – Base Value is set for the added
property as of January 1 of the calendar year preceding the
effective date of the ordinance amending the TIF Area to include
the added property.
– Begins the clock on any TIF Area Sunset:
• ED – clock begins to run from the calendar year following the
calendar year in which the municipality first certifies debt
• Non-LMI Housing – clock begins to run from the second fiscal year
after the year in which the municipality first certifies debt
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TIF Computations and Considerations How To Compute TIF
• New Value After Improvements
• Frozen Base Value
• Difference in Assessed Value
$2,000,000
$ 50,000
$1,950,000
Combined Tax Levy = $32/$1,000
Less:
Debt Service Levies
and School’s PPEL (physical plant and equipment)
& ISPL (instructional support)
$ 4/$1,000
Net TIF Levy
= $28/$1,000
Net TIF Levy times Difference in Assessed Value = Tax Increment
$28/$1,000 x $1,950,000 = $54,600 Tax Increment per year
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TIF Computations and ConsiderationsTIF Timing
FROM PROJECT COMPLETION TO TAX COLLECTION
HOW THE SYSTEM WORKS
2017/2018
CAUTION
Project Completes Summer 2015
Assessed 01-01-16
Taxes Based on 01-01-16 Valuation Will
Not Be Paid Until Fiscal Year 17-18
Until And Unless Incremental Taxes Are
Collected (Which Could be Even Later Than
Fiscal Year 17-18) There Are No TIF
Reimbursement Dollars to Spend
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TIF Computations and ConsiderationsTIF is a Reimbursement Process
• TIF is a REIMBURSEMENT PROCESS. The City or County
certifies “loans, advances, indebtedness or bonds.”
• Tie these 3 things together:
1. Authority for the UR Project in the Plan (description
and dollar amount).
2. Resolution by Council/Board approving the
expenditure as an UR Project, authorizing payment,
and qualifying it to be included in December 1
certification to county.
3. December 1 certification to the county auditor of
the expense.
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TIF Computations and ConsiderationsPOLITICAL CONSIDERATIONS
• Educate, Educate, Educate
– No Surprises
• Not a magic bullet
– Balance various interests
– Realize risks
• Be prudent
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–
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–
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Prioritize needs
Incur debt for highest need
Pay off debt with TIF
Incur new debt for next need
Pay off debt with TIF
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UR Area Adoption Process –
WHO HAS THE POWER?
• Cities and counties have the ability to form an Urban
Renewal Area by the adoption of an Urban Renewal Plan.
– Usually adoptions of UR plans are done separately by
the City and County, but in some cases the City and
County may work together on an Urban Renewal
Project
– City needs the consent of the County to adopt an UR
Plan within 2 miles of the City
– County needs the consent of the City to adopt a UR
Plan within 2 miles of City limits or within the City
limits
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UR Area Adoption Process –
Preparing the UR Plan
• Plan contents
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–
–
–
–
–
–
–
–
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Area Legal Desicription
Area Designation – Slum, Blight, ED, mixed, etc.
Base Value
Conformity with general plan for physical development of
the City as a whole
Objectives
Activities
Projects
Financial information (debt limit & outstanding debt)
Ag Land consents
Effective Period – voluntary or statutory sunsets
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UR Area Adoption Process – First Meeting
• Put item on Agenda
• First Meeting
– Resolution
•
•
•
•
Declare Necessity
Set Consultation Meeting
Set Public Hearing and Order Publication of Notice
Set P & Z Meeting
– Attach Plan to Resolution as Exhibit 1
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UR Area Adoption Process –
Consultation
• Consultation = meeting with other taxing entities to discuss TIF
issues related to UR Area.
• MAIL notice of consultation to other taxing entities with
– Notice of public hearing
– Resolution with Plan attached
• Address to School Board President; County Auditor.
– Make sure you identify all schools, counties, etc.
• Other taxing entities can provide written comments within 7 days of
consultation meeting
• Must respond in writing at least 7 days prior to public hearing
• Prepare summary of meeting and give to Council/Board prior to
public hearing.
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UR Area Adoption Process – Public Hearing/Notice
• Notice
– Must describe UR Area, Plan and Projects
– Must be published in newspaper having general
circulation in the community
– Must be published no less than 4 and no more than 20
days prior to the public hearing
– Complete Certificate of Publisher’s Affidavit
• Public Hearing
– Council/Board must accept/consider any written or inperson question/comments and document receipt of
the comments/questions prior to voting to adopt UR
Plan/Area
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UR Area Adoption Process – P & Z
• P & Z must provide recommendation as to whether UR
Plan is “in conformity with the general plan for the
development of the municipality as a whole”
– “general plan …” generally the “comprehensive plan.”
• P & Z must be given up to 30 days to provide its written
recommendation
– Can work with P & Z as to required time-period
• P & Z must provide written recommendation prior to
public hearing
• If no P & Z then Council/Board should make requisite
finding
• P & Z consideration NOT required for Amendment
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UR Area Adoption Process – Approving
Plan
• Put item on Agenda
• Second Meeting
• Hold Public Hearing
– Record comments
• Pass Resolution adopting Plan (attach Plan as
Exhibit 1)
• Record Resolution with Plan attached
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TIF Ordinance Passage Process
• Put item on agenda
– Consider TIF Ordinance only AFTER UR Plan has been adopted
• Can be at same meeting UR Plan is adopted, provided TIF Ordinance
adopted AFTER UR Plan approved
• Follow ordinance passage process
– GENERALLY – requires three readings unless additional readings
suspended
– GENERALLY – effective upon publication following final passage
• City – Iowa Code chapter 380
• County – Iowa Code § 331.302
• File Ordinance with County Auditor and get Certification
– Iowa Code 403.19(5)
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COUNCIL/BOARD
•Resolution to set
hearing
•Receive reports
on consultation
•Refer to P&Z
(not required for
amendments)
•Receive report
from P&Z (not
required for
amendments)
•Hold consultation
•Hold Hearing
Hold
Consultation
•Draft UR Plan
is approved by
Staff and
Counsel
•Send copy of
resolution,
•and notice of
consultation to
affected taxing
entities.
AFFECTED TAXING
ENTITIES
P&Z
(not required for
amendments)
•Written
response to
consultation
parties
•plan,
ASAP (new plan only)
CLERK/
AUDITOR OR
DESIGNATED
STAFF
•Obtain written
permission of all
Ag owners and
city/county
joint agreement
(if applicable).
•Receipt by P&Z
(new plan only)
•Pass Ordinance
•Report to
Council/Board
•Publish
Ordinance
•Record Plan
•Written
comments about
plan.
NOTMORE THAN 30 DAYS
•P&Z report to
council/board
(new plan only)
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Other Economic Development Tools
• Urban Revitalization – Ch. 404
– City or County can adopt an Urban Revitalization Plan
for an area that qualifies for tax abatement to provide
an abatement/exemption of ALL property taxes on the
new value on commercial and/or residential
improvements.
– Available Schedules (404.3/404.3A)
• Residential – 100% for 5 years on first $75,000
– Blight/LMI/Historical – more options up to 100% for 10 years.
• Commercial/Industrial – 10 year declining (80, 70, 60, 50, 40,
40, 30, 30, 20, 20) or 100% for 3 years
• Multi-residential or commercial with 3 or more living
quarters and at least 75% residential – 100% for 10 years
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Other Economic Development Tools
• Urban Revitalization – Ch. 404
– Specify percent of increase in actual value due to
improvements required to qualify for abatement:
default = 15%;10% for residential
– Interplay with Urban Renewal
• Can have different schedule for property in UR Area
• Make sure don’t count on increment if subject to
abatement
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Other Economic Development Tools
•
Urban Revitalization – Ch. 404 – Adoption Procedure
– An initial Council meeting to pass a resolution of necessity relating to the proposed Urban
Revitalization Plan and scheduling a public hearing.
•
The Plan must include at least twelve items specifically itemized in Iowa Code section 404.2, including
but not limited to:
–
–
–
–
the boundary of the area,
an itemization of every property owner in the area and the assessed value of the land and buildings (listing the
values separately),
the types of property eligible for abatement,
and the abatement schedule being utilized.
– Provide two types of notice of the public hearing:
•
•
published notice AND
mailed notice to the last-known addresses of all owners of record and “occupants” of addresses
located within the proposed area.
– Hold the public hearing and adopt the Resolution Adopting the Urban Revitalization Plan,
subject to a thirty (30) day waiting period in which the Council may or may not receive a
petition from a minimum percentage of land owners or occupants.
– In the event of a valid petition, the Council will be required to hold a second hearing.
– Adopt and publish the Ordinance establishing the area.
– This entire process will take at least 90 days AFTER the Urban Revitalization Plan is drafted
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Other Economic Development Tools
• Urban Revitalization – Ch. 404 – Adoption
Procedure
– After the Urban Revitalization plan is adopted, a
qualified property in the Urban Revitalization area
does not receive the available abatement unless
they apply for the abatement with the City and
the City Council finds by resolution that the
improvement satisfies the terms of the Plan and is
qualified for the abatement.
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Other Economic Development Tools
• Industrial Abatement –Ch. 427B
– City or County can provide by ordinance for
abatement/exemption of all property taxes for 5
years on a declining sliding scale from 75 percent
to 15 (75, 60, 45, 30, 15) percent for actual value
added by new construction (including additions)
of industrial real estate, distribution centers,
research-service facilities and machinery and
equipment assessed as real estate.
• No dual exemption allowed
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Other Economic Development Tools
• High Quality Jobs Creation Act – Ch. 15.332
– Up to 100% abatement/exemption of all property taxes for 20
years on actual value added by improvements (new, rehab.,
expansion) directly related to new jobs under the program
• Annexation Phase-in - Ch. 368
– Exemption of City taxes on property annexed by City on
declining percentage (75, 75, 60, 60, 45, 45, 30, 30, 15, 15)
– Apply to all property in annexation area
• City-only grant - Ch. 15A
– Provide city-only property tax rebate
– Tied to job retention/creation (Economic Development)
• Others
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QUESTIONS?
Contact Information:
Nathan J. Overberg
(515) 246-0329
Ahlers & Cooney, P.C.
noverberg@ahlerslaw.com
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